While the US economy has shown resilience in recent years, certain indicators are raising concerns and potential risks such as mounting inflationary pressures, monetary policy adjustments, and geopolitical uncertainties could potentially tip the economy into a downturn.
In an interview with CNBC-TV18, Fook Hien Yap, Senior Investment Strategist at Standard Chartered Bank, said the bank’s perception was that a recession in the United States would likely occur in late 2023. However, they have now revised their perspective and anticipate the recession to take place in the first quarter of 2024.
“We used to think that a US recession would be happening towards the end of this year, but we have now pushed out our view to the first quarter of 2024 and a primary driver for that has been the US consumers because of the pent-up savings from the pandemic. So, they still have some excess savings that can use and that is keeping the economy stronger than expected,” Yap said.
Yap's predictions are based on a careful analysis of various economic indicators and trends. The senior investment strategist emphasised that it is crucial for investors and policymakers to closely monitor key factors that may influence the US economy in the coming months.
Factors such as increasing interest rates, elevated inflation, an inverted yield curve, and an unforeseen banking crisis have all been identified as potential catalysts for an imminent recession. The New York Fed recession probability indicator, which stands at its highest level in over forty years, suggests a 68.2 percent likelihood of a US recession occurring within the next 12 months. Additionally, other dependable economic indicators are issuing cautionary signals, indicating that the US economy may be on the verge of a downturn.
However, despite these circumstances, the US labour market remains robust, presenting a contrasting picture. Economists are divided on whether a recession is inevitable given the unconventional economic landscape.
Meanwhile, Adrian Mowat, Investor at Hong Kong SAR said, “The story in the US is that the chances of a recession or hard landing are diminishing unless the central bank gets very aggressive and puts on quite a few extra rate hikes.”
On the contrary, Ed Yardeni, President of Yardeni Research, expressed a different viewpoint, stating that even if the Federal Reserve were to increase interest rates by 50 basis points (bps), it would not pose a significant challenge to the economy.
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